Check Point Software Technology ( CHKP ) CEO Gil Shwed tipped the domino in 1994 when he unveiled the world’s first commercially available firewall. Ten years later, CyberArk Software ( CYBR ) jumped into the nascent privileged-account security field. Their commonality? Both are based in security-minded Israel and led by men with military backgrounds. Both have also outperformed the sluggish 2016 cybersecurity market that, in January, was tugged down by gloomy guidance from LinkedIn ( LNKD ) and Tableau Software ( DATA ). Wall Street quickly panicked, fearing a big slowdown in IT spending. IBD’s 41-company Computer Software-Security industry group is down a collective 11% this year. Check Point stock withstood the fall and is up 6.6% year to date. CyberArk stock is down, but by just 6.4%. That’s not to say non-Israeli cybersecurity firms didn’t also buck the trend. Symantec ( SYMC ) stock is up 9%. Shares of Fortinet ( FTNT ) and Palo Alto Networks ( PANW ) have fallen a fraction and 8.5%, respectively, also outperforming the sector overall. As the industry recovers, BlueStar Global Investors analyst Joshua Kaplan says investors should turn to the Israeli security software companies Check Point, CyberArk, Imperva ( IMPV ) and Radware ( RDWR ) for innovative products and rising earnings. Israel Steeped In Security Efforts “Israel is in a rough neighborhood. It’s surrounded by enemies on all three sides,” Kaplan told IBD. For that reason, cybersecurity “is a critical part of Israel’s military edge.” Check Point was borne out of Shwed’s Israel Defense Forces (IDF) service, where he was a member of Intelligence Corps Unit 8200. But he began coding long before that: At age 12, he took a coding position at a language-translation software company, according to online news magazine Israel21c . Udi Mokady, too, served in the IDF military intelligence unit before he was tapped to lead CyberArk in 2005. CyberArk made its IPO in 2014, opened at 25 — above the 16 listing price — and ramped 26% in its first two days. (Note that Israeli cybersecurity firms aren’t alone with a military influence at the top. Silicon Valley-based Palo Alto Networks CEO Mark McLaughlin served in the U.S. Army, where he flew an attack helicopter before his 2011 appointment to that security firm’s top spot.) Israel’s innovative tech stems largely from required military service, Kaplan says, noting the silos separating private, public and government sectors are less clear-cut than those in the U.S. Those military skills typically translate well to the private sector. Shwed did as much with his firewall, originally an airtight setup to tie two top-secret Israeli military computer networks. He launched Check Point’s firewall — a software system designed to monitor a network and keep out any unauthorized users — shortly before Silicon Valley-based Cisco Systems ( CSCO ) entered the perimeter market. Now, Kaplan says U.S. and other firms will have to innovate as quickly as their Israeli counterparts to keep pace. The cybersecurity sector is poised for a shake-up as the industry matures, and a number of companies may not survive, he said. “IT spending is not going to drop, it’s going to stabilize at a higher level than it was before,” he told IBD. “When an industry’s growth starts to slow down a little bit, sometimes there’s forced consolidation and companies that just don’t make it.” Check Point is going to stay ahead of that curve by pushing into the platform market. “Platform” is currently the word du jour for the industry, with pure players and tech giants alike touting their wholesale approach to security. Palo Alto Networks, Fortinet, IBM ( IBM ), FireEye ( FEYE ) and many others market security platforms. “There are going to be several companies who are industry leaders and who gain share,” Kaplan said. “But I do believe Check Point started this initiative first.” Imperva: Not ‘A Household Name’ Cloud-based security firm Imperva also ramped up after its 2011 IPO priced at 18, jumping 47% on day one and peaking last November above 77. Imperva has a heavy focus on data center security. Over the years, though, the stock has had big up and down moves after earnings, Kaplan says. Now that the industry’s highest growth, at least for now, seems to have passed, he says it’s unlikely Imperva will gain much notoriety. “I’m not sure Imperva is ever going to be a household name,” he said. “And Radware, I don’t think it’s ever really going to get that investor excitement that it should have.” But the PureFunds ISE Cyber Security ( HACK ) ETF has helped some under-the-radar security firms get noticed, Kaplan says. “Until the HACK ETF came along, a lot of people probably hadn’t heard of the other three Israeli cybersecurity companies outside of Check Point,” he said. “That’s the reason you want to be invested in these companies. Maybe they weren’t on your radar before, and they should have been.” The PureFunds Cyber Security ETF debuted in 2014 and is down 7% this year, after taking some software-related licks in January. Andrew Chanin, CEO of PureFunds, stresses the fund’s diversification. “Before we launched, there was a lot of demand for investing in cybersecurity, but being it’s a constantly adapting, evolving and changing industry, many people don’t understand the companies, their products and services,” he told IBD. PureFunds tries to do the investing legwork. The HACK ETF currently features 35 distinctive cybersecurity firms, including Check Point, CyberArk, Imperva and Radware. But Chanin questions whether investors know — or care — that the four are Israeli. Israel is an obvious tech hub, “but (the companies) weren’t going around saying, ‘Hey, we’re an Israeli company, use us,’ ” he said. More than ever, big tech companies are taking the security plunge, Chanin says, and acquisition rumors are rumbling, including talk that Check Point might be eyeing CyberArk. “We’ve seen many larger, diversified companies come out and say it’s a goal of theirs to increase their cybersecurity footprint,” Chanin said. “Building something organically isn’t easy and acquisitions could save time and money in that plan.”